Unemployment claims dip, but outlook still clouded

Unemployment claims still above 400,000, though four-week average now at six-month low. Unemployment claims need to drop to 375,000 to signal stronger job growth.

By
Christopher S. Rugaber, AP Economics Writer /
October 20, 2011

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In this photo taken last year, a job seeker waits, with résumés in hand, to speak to recruiters while attending a Global Recruiting Solutions job fair in Livonia, Mich. The four-week average for first-time unemployment claims dropped to 403,000 last week, but must reach 375,000 so signal significant job growth.

Paul Sancya/AP/File

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WASHINGTON

Applications for U.S. unemployment benefits have fallen to a six-month low, according to a four-week averaged calculated by the government.

Some economists said the steady decline signals fewer layoffs and possibly stronger job growth in the months ahead. But they cautioned that employers are not yet hiring at healthy levels.

Weekly applications dropped by 6,000 to a seasonally adjusted 403,000, the Labor Department said Thursday. The four-week average fell for the fourth straight week to 403,000. A month ago it was 422,250.

"This decline in initial claims signals the potential for an improvement in the pace of job creation in October relative to recent months," said John Ryding, an economist with RDQ Economics. "However, we are still waiting for that decisive move in claims below the 400,000 mark to send a stronger signal that payroll growth is running at a pace that will begin to make sustained inroads into unemployment."

Many economists say applications need to fall consistently below 375,000 to signal sustainable job growth. They haven't been below that level since February.

Economists have been closely watching unemployment benefit applications since fears of another recession intensified this summer. Layoffs and applications tend to rise at the beginning of recessions.

Employers have added an average of only 72,000 jobs per month in the past five months. That's far below the 100,000 per month needed to keep up with population growth. And it's down from an average of 180,000 in the first four months of this year.

In September, employers added only 103,000 jobs last month, and the unemployment rate remained 9.1 percent for a third straight month.

Employers pulled back on hiring this spring, after rising gas prices cut into consumer spending and Japan's March 11 earthquake disrupted supply chains. That slowed U.S. auto production.

Auto output has rebounded in the past couple of months and gas prices have come down from their peak in early May. In September, consumers increased their spending on retail goods by the most in seven months.

Those trends likely boosted growth in the July-September quarter to about 2.5 percent, economists predict. That's an improvement from the 0.9 percent annual rate in the first six months of this year. But it's not enough to spur much job growth.

The number of people receiving unemployment benefits rose 25,000 to 3.7 million. But that doesn't include several million additional laid-off workers receiving extended benefits under an emergency program paid for by the federal government and put in place during the recession.

All told, 6.7 million people received benefits in the week ended Oct. 1, the latest data available.